If you see just ONE graph this decade…

Dec 8, 2011 – Unsurprising, but jaw-dropping – this graph which George Monbiot linked to a few weeks ago. A continual rise in productivity, matched by a rise in wages… until around 1980. Hold in mind the perpetual rise in productivity, and consider…

In his new book (on Keynes & the economic crisis), Skidelsky quotes a paper by Thomas Palley, which argues that under the neoliberal model (starting around 1980): “the commitment to full employment was abandoned as inflationary, with the result that the link between productivity growth and wages was severed.” With productivity growing and wages falling in real terms, consumer demand was built upon increasingly high levels of household debt.

All true, of course. But what many accounts leave out is the staggering level of technological advance since 1980. (Advances which ultimately wouldn’t exist without public funding/infrastructure). This enormous technological component of productivity doesn’t translate into wages for human labour, hence the necessity of solutions such as a Citizen’s Income.

It’s good to see commentators such as Robert Skidelsky and Polly Toynbee talking about a Citizen’s Income. This is the same proposal that goes under the names Basic Income, UBI, National Dividend, etc (I’ve written about these proposals in more detail here). I suspect you’ll be hearing a lot more about Citizen’s Income in the months/years to come.

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4 Responses

The other, more significant advantage of a Citizen’s Income is its part in simplifying the tax and benefit system. If you have a basic tax allowance, and tax people on the difference between their tax allowance and their actual income – whether the difference is positive or negative – so that benefits are treated as the negative tax that functionally, they already are.

Excellent point. And as you probably know, one variant of Basic Income was called ‘Negative Income Tax’. George Lakoff writes (in Moral Politics, p421) that a Negative Income Tax is needed as a correction to the failings of the current market system.

Given that technology has driven the advances in productivity per worker, a Citizens Income based on that margin only makes sense if you treat the means of production as a social good. Interesting in theory, but failed miserably in application over the better part of the 20th Century.

You seem to be implying that increased productivity should lead to higher wages. But this is not the case. In the sector of business I work in, which should be typical of most, increases in our productivity are reflected in equivalent progress in our competitors, which drives the price of the product down. If it were not for this deflationary effect we could now pay all our staff a bundle, but get real, a competitive market won’t stand for that. There may be a few lucky sectors where the increased productivity has directly converted into greater profit, but these will be less competitive and/or highly innovative areas only.